October 1, 2013 is a big day in the world of Obamacare. It appears that by October 1, anyone who works for an employer with revenue of more than $500,000 and has at least one employee should receive a letter from that employer titled “Notice to Employees of Health Insurance Marketplace Coverage Options”. The employee can then take the letter to the federal on-line insurance exchange and use it to buy coverage. What is the letter going to say? There are two versions of the model letter that are available through the Department of Labor’s website at www.dol.gov/ebsa/healthreform. The first version is for employers who do not provide health insurance to their employees. The second version is for employers who do currently provide employer-paid health insurance to their employees. Both versions have a Part A and a Part B. Part A is “General Information”. Part B is “Information About Health Coverage Offered by Your Employer”.
Part A includes several important pieces of information. First, it notifies the employee that the federal on-line insurance exchange, called “Health Insurance Marketplace”, does exist. It gives contact information for the Marketplace; a brief description of the Marketplace; and the products and services available through the Marketplace. It directs interested people to the government’s website: www.HealthCare.gov for more information. Second, it notifies the employee that there is potentially a premium tax credit available to help the employee pay for coverage should the employee buy insurance through the Marketplace. The credit is based on several factors, including the family income of the purchaser; the actual policy purchased; whether the employer provides insurance or not; and if the employer does provide insurance, does that insurance cover less than 60% of the value of allowable claims. The third item the letters must itemize is the fact that employee may lose a tax-free fringe benefit if the employee opts to purchase health insurance through the Marketplace. The employee may gain a credit but lose a tax-free fringe benefit.
Part B for employers who do not provide health insurance gives employer information the employee needs to go to the Marketplace to purchase insurance. The Marketplace coordinator may contact the employer to verify the accuracy of the letter so common information such as name, address, telephone number, federal identification number, employer contact person, and email address must be provided. Part B for employers who do provide health insurance is a little more involved. It has the employer contact information but it also has a series of questions concerning the health insurance provided. Questions 13 and 14 identify who is eligible for coverage. Question 15 allows the employer to declare whether the current plan meets the “minimum value standard”, i.e. if 60% of allowable claims would be covered. Question 15 also requires the employer to make a calculation to determine if the cost of insurance does or does not exceed 9.5% of the employee’s income. If the cost is less than 9.5%, it is deemed “affordable”. If it exceeds 9.5%, it isn’t “affordable”. Question 15 does have a “cannot be determined” answer if the employer can’t calculate the affordability aspect or the minimum value aspect. Question 16 asks if the employee is currently eligible or will be within the next three months. Question 17 again asks about meeting the minimum value standard. Question 18 asks how much the employee has to pay for his insurance and how often. Question 19 asks if the employer contemplates making any changes in the next plan year such as increasing the employee portion or dropping coverage altogether.
In the Department of Labor’s guidance for the delivery of the letter, they say the letter may be provided by first-class mail or by electronic delivery. If electronic delivery is used, a read receipt confirmation must be provided. Of course, if first class mail is used, there is no receipt confirmation, but it is presumed that the U.S. Postal Service will efficiently do its’ job. As an alternative, the employer may hand deliver the letter and have the employee sign an Acknowledgement of Receipt. For small employers, who are in direct contact with their employees, we recommend that the letter be hand-delivered and that the Acknowledgement of Receipt be retained in the employee’s file. If the DOL does audit the employer and the employer cannot provide proof of delivery, the penalty that may be assessed to the employer at this point appears to be $100/day/employee. An Acknowledgement of Receipt could prove to be a valuable piece of paper to the employer should the DOL come knocking.
The Affordable Care Act is being implemented. The train has left the terminal, so to speak. This Required Notice to Employees gets many employers involved and will serve as a wake-up call that national health care is here and must be dealt with. Currently, this affects only employers with $500,000 of revenue with at least one employee. The thinking is that the $500,000 will decrease in the future and all employers, regardless of revenue and the number of employees, will be required to send out notices. This is Jerry Coon signing off.
Jerry Coon is an Enrolled Agent and a
Registered Tax Return Preparer.
He owns Action Tax Service on
Northland Dr in Rockford.
Contact Jerry through his website: